Did you ever pause and think that maybe there really is no problem with the current model, and you are trying to reinvent a wheel that works fine as it is? Trying to find a solution to a problem that does not exist usually leads nowhere.
Could someone please fill out this table: Code: LS: Long Stock SS: Short Stock LC: Long Call SC: Short Call LP: Long Put SP: Short Put Combinations (of Synthetics): LS + SS = LS + LC = LS + SC = SP LS + LP = LC LS + SP = SS + LC = LP SS + SC = SS + LP = SS + SP = SC LC + SC = LC + LP = LC + SP = LS SC + LP = SS SC + SP = LP + SP = --- total 15 combinations of 2 possible
I just wonder: Why should one buy a Stock if one instead can get the synthetic version of it even for free (!) by Selling a Put and Buying a Call (with same params) ! Same with the synthetic version of Short Stock! Cf. table below with the Synthetics. Here's also proof that it indeed is costless, ie. a free lunch! See column "Debit/Credit = 0" : Ie. you get something for free. It can gain in value or lose in value. But if it loses then you have to pay the losses... Is this the right interpretation? IMHO yes.
Nope, all clear now. Here's the full table: Code: LS: Long Stock SS: Short Stock LC: Long Call SC: Short Call LP: Long Put SP: Short Put Combinations (of Synthetics): LS + SS = (neutral nonsense) LS + LC = (like a LS #1) LS + SC = SP LS + LP = LC LS + SP = (like a LS #2) SS + LC = LP SS + SC = (like a SS #1) SS + LP = (like a SS #2) SS + SP = SC LC + SC = (neutral nonsense) LC + LP = (like a "V") LC + SP = LS BUT: this is even a free lunch! :-) SC + LP = SS BUT: this is even a free lunch! :-) SC + SP = (like an "A", ie. inverse of "LC + LP") LP + SP = (neutral nonsense) --- total 15 combinations s.a. https://tickertape.tdameritrade.com/trading/synthetic-options-strategies-15457
I now analyzed this, and @Kevin Schmit, and your above re-formulation of his objection, is right. Unfortunately. Also the 2nd objection of @Kevin Schmit is true. Hmm. too bad... Game Over! :-(